Murlidhar Kishangopal of
Indore, made an application under section 26A of the Act for registration of their
partnership firm as constituted by a deed of partnership dated February 3,
1949. It was stated by the assessee that Murlidhar Jhavar and his six sons were
members of a joint Hindu family carrying on business in money lending and
speculation; that the family disrupted and that subsequently Murlidhar and his
sons formed a partnership and executed a deed of partnership. The Income tax
Officer rejected this application. In rejecting the claim for registration he
gave as his reasons that after partition Murlidhar and his six sons continued
to live and mess together, and that Murlidhar continued to have full and
exclusive control of business and the bank account, which Murlidhar used to
keep in his own name while the joint family was doing business under the name
and style of "Poosaram Murlidhar", continued to be operated by
Murlidhar even after the drawing up of a partnership deed and the bank was not
informed that the Hindu undivided family had disrupted. The income tax officer
treated the assessee as an association of persons for the purpose of
assessment. He added that it was no doubt open to the person entering into a
partnership to impose inter se such terms as they thought fit, but the terms
must be reasonable and there was no jurisdiction whatsoever for Murlidhar, who
was fairly advanced in age, to keep the management and control of business
exclusively with him. They were that the stamps for the deed of partnership
were purchased even before the date of disruption of the joint family, and that
the firm was not registered under the Indore Partnership Act for nearly a year
and a half after the commencement of the alleged partnership.
The Madhya Pradesh High Court
held on this appeal that the partnership deed dated 3rd February, 1949, is a
genuine and not a sham transaction. The assesses shall have the costs of this
reference.
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